Inside Dropbox’s Quest to Bury the Hard Drive

Dropbox CTO Arash Ferdowsi (left) and CEO Drew Houston | Platon

Drew Houston, the 30-year-old CEO and cofounder of Dropbox, is supposed to be having his Steve Jobs moment. In an auditorium packed with elite coders and Silicon Valley insiders in July, Houston is debuting new features he says will transform Dropbox into the mobile era’s answer to the hard drive. This is DBX, the company’s first developers conference. It’s Houston’s bid to convince the software industry to buy into his grand vision—and the Wi-Fi isn’t working.

The demo team is trying to show off a digital drawing app that allows you to sketch on your iPad in, say, San Francisco and have the sketch appear simultaneously on a colleague’s device anywhere in the world. It was meant to be the centerpiece of Houston’s pitch for his ambitious new strategy. Dropbox is known for its supremely useful cloud storage service, which lets you drop files into a folder that can be accessed from any computer. But going forward, the company wants to power a new breed of syncable apps that would let you share any kind of data with anyone across any device. In theory it’s an epic shift that would put Dropbox at the center of everyone’s digital life, turning it into a powerhouse on the level of Facebook, Google, Amazon, and Apple. But it’s hard to see that when the demo doesn’t work.

After an awkward moment, Houston returns to center stage. But if the glitch has rattled him, he doesn’t show it. “You’d think that I would be sad about what just happened,” Houston tells the audience. “Actually this is a really good omen.” He explains that the Wi-Fi also failed when he was onstage launching the original Dropbox in September 2008. Back then he was trying to sell the world on just how wonderful and simple his new magic folder was. Instead, nothing happened. But in the five years since, it’s clear: “Things worked out.”

Indeed. In little more than half a decade, Dropbox has grown from a few lines of code banged out in a bus station to a go-to service with 200 million users saving more than a billion files every day. So there’s reason to believe it can pull off its plan to become what the company calls the “pervasive data layer.” In this vision, Dropbox acts as a kind of virtual infrastructure that lets you access all your digital stuff whenever, wherever—via tablet or PC, iOS or Android. Leave off playing Angry Birds on your phone and pick up the game at the same spot on your iPad or your television or the touchscreen in your car. Devices become dumb windows for accessing the information—your information—in Dropbox’s cloud. That’s where your stuff lives. And you’ll pay Dropbox for more space because you will want to put more stuff there.

To satisfy its ambition, Dropbox must build a complicated service that works perfectly, intuitively, reliably. To that end, the company has recruited a Silicon Valley dream team: The engineer who helped create Facebook’s News Feed. The inventor of the Python programming language. The guy who designed Facebook’s Like button. The former lead designer for Instagram. The engineer responsible for Google’s ad engine. In the audience, in a conspicuous show of support or perhaps torch-passing, is Mark Zuckerberg.

“What we’re talking about is not just sync or new features,” Houston tells the crowd. “This is really an important step in fixing a lot of what’s wrong with technology.”

Ever since it was founded in 2007, Dropbox has pursued a simple idea with single-minded focus: providing ubiquitous access to personal information in a way that is elegant and uncomplicated. That focus was put to an early test in 2009, the year after Dropbox launched, when Houston and his Dropbox cofounder, Arash Ferdowsi, received the Silicon Valley equivalent of a royal summons: Steve Jobs wanted to meet. With Apple’s own iCloud online storage service still nearly two years from release, Jobs reportedly wanted to convince these two young upstarts that their best chance at success was to sell to Apple. Dropbox was a “feature, not a product,” Jobs said. In other words, they didn’t really have a business. They had a cool add-on.

Houston clearly admires Jobs, right down to the dark sweater, jeans, and sneakers he wore for his own keynote. But Dropbox didn’t sell, and its decision to play the long game has paid off. In October 2011, the same month iCloud debuted, investors showered Dropbox with $250 million in funding—a sum that boosted the company’s valuation to a reported $4 billion. iCloud, meanwhile, sputtered.

Clockwise from top left: Ruchi Sanghvi, Dropbox’s VP of operations, came from Facebook, where she cocreated the News Feed; members of the Dropbox DBX team; Houston with VP of engineering Aditya Agarwal; a collection of various Dropbox mascots greets visitors at the door; a workstation. | Ariel Zambelich

Though he might dress down like Jobs and most other tech CEOs, Houston doesn’t share the late Apple founder’s West Coast mystical streak. Nor does he seem to approach business with Jobs’ famous abrasiveness. A suburban New Englander who was head of recruiting for his fraternity at MIT, Houston’s regular-guy persona sets him apart in a sea of awkward geniuses. He’s the karaoke-loving rhythm guitarist in a grunge cover band who also happens to be an ace coder. He taught himself to be an entrepreneur by reading stacks of business books he bought on Amazon while sitting in a folding chair on the roof of his frat house. He’s a person, just like the rest of us, who hated emailing files to himself so he could work on them at home.

He also discovered the hard way the pitfalls of relying on gadgets to carry files from place to place. It was November 2006. While waiting at Boston’s South Station for a bus to New York, he realized he’d left the thumb drive containing the files he needed in his apartment. Now he was about to be stuck on a bus for four hours, time he’d planned to spend working on the SAT-prep startup he had founded after graduating in 2005.

Instead of cursing his luck and taking a nap, however, Houston started coding a version of what would become Dropbox’s signature folder, the portal to an app that magically holds and syncs the same files on every computer and mobile device where you install it. He soon saw that what he was making had the potential to be useful to everyone. “You think about who needs Dropbox,” he said years later, “and it’s just about anybody with a pulse.”*

We have all our digital stuff no matter where we go, no matter what device we have.

With his prototype in hand, Houston made a demo video that he posted to Hacker News, the geek newswire offshoot of Y Combinator, Silicon Valley’s leading startup accelerator. Readers voted the video to the top of the site. Houston realized he would need help—a cofounder. A mutual friend introduced him to Arash Ferdowsi, a quiet MIT undergrad coder from the Kansas City suburbs. Ferdowsi already had a Google internship under his belt and an offer to spend the following summer at Facebook. After a few hours with Houston, Ferdowsi decided to bail on Facebook and go with Dropbox, where he now serves as chief technology officer. “I’m pretty binary on people. I either have a good feeling or a bad feeling, and I had a good feeling,” Ferdowsi says of Houston.

After they landed a coveted Y Combinator slot in the summer of 2007, Houston abandoned both the SAT startup and Massachusetts and headed to Northern California. During the pair’s early days, Houston says, the challenge was to stay aware of Dropbox’s potential without psyching themselves out with visions of a billion users—or a billion-dollar payday. “If you’re going to go to the moon, you don’t shoot the rocket right at the moon,” he says. “You have to go at it obliquely.”

Instead, the Dropbox vision grew by powers of 10: 10 users, then 100, then 1,000, then 100,000—a figure reached shortly before the service launched publicly. As the audience expanded, so did the sense that they could start taking steps toward their grander vision.

The features released this summer may represent the fullest realization yet of plans to make Dropbox about more than just syncing files. But that goal was implicit from the outset, says Bryan Schreier, a venture capitalist with Sequoia Capital, who has helped shepherd Dropbox since before its public debut. “When you heard the vision, it was easily misunderstood as being about storage,” Schreier says. “But you realize it’s not about storage. It’s about accessibility. It’s about availability.”

That’s where the roster of tech stars comes in. Ruchi Sanghvi and Aditya Agarwal came from Facebook, where Sanghvi was the social network’s first female engineer. She’s probably best known for cocreating the News Feed. The two left Facebook in 2010. Last year both joined Dropbox, which had just acquired their startup (along with cofounding a company, the pair are also husband and wife). Sanghvi now leads operations at Dropbox, and Agarwal heads engineering.

Another top engineer putting in nights and weekends at Dropbox’s vast San Francisco loft is Guido van Rossum, inventor of Python, the programming language released in the late ’80s and on which Dropbox and countless other pieces of software are built. Van Rossum’s decision to leave Google for Dropbox late last year put the tech world on notice about the caliber of talent putting its faith in the young company’s potential for success.

He describes life at Dropbox as “just a bunch of really smart kids doing cool stuff.” He says they remind him of himself when he was one of those kids hacking away with like-minded geeks two decades ago to perfect Python. “Dropbox has done an amazing job building a product that everyone knows and everyone uses and everyone loves,” he says. (Well, 200 million someones, anyway.) At the same time, he says, he was drawn by the prospect of fending off challenges from much larger competitors—such as his former employer—by helping Dropbox grow as quickly as possible: “The urgency was very compelling.”

To grow at a pace that keeps Dropbox a credible contender, the company believes it must focus on becoming the default file system for a multiscreen world. But that will happen only if it manages to convince third-party developers to incorporate Dropbox into their apps. And not just a few. Pervasive data is only pervasive if you can truly access that data from every app, from social networks to email to games to word processors to web browsers. Ultimately that demand will have to come from Dropbox users. Right now the company is working to seed that demand through events like the DBX developers conference.

In the meantime, Dropbox must keep rivals large and small at bay. Among startups, a leading nemesis is the similarly named Box, which was founded shortly before Dropbox. Box has since turned its focus away from the consumer market that Dropbox courts to pursue business customers, a segment Dropbox is also eagerly chasing. Box says it has more than 120,000 companies on board, including 92 percent of the Fortune 500. Dropbox says it has millions of businesses signed up.

Much more worrisome for Dropbox are Google’s Drive, Apple’s iCloud, and Microsoft’s SkyDrive, sync-and-store products that do a lot of what Dropbox does, at least on the surface. These big tech companies can subsidize their consumer cloud offerings with the money they make from other lines of business in a way that the startups can’t. That could make it difficult, even impossible, to compete.

But that’s not the right way to look at the competitive landscape, Dropbox backers say. The company isn’t selling server space. It’s selling a service. And when it comes to service—continuous improvements, overall experience—Dropbox is beating the behemoths. Google, for example, took about seven years to launch Drive, which was finally released to the world last year. “I wouldn’t expect them to quickly iterate from there,” deadpans Facebook cofounder and Dropbox investor Dustin Moskovitz.

Meanwhile, Dropbox keeps attracting new users, thanks to a product that, as the blazing neon sign at one end of its office reads, “just works.” Compare that claim to, for instance, Apple’s clunky iCloud, which works mostly to keep your data locked inside Apple’s tidy ecosystem of hardware and software. Dropbox is counting on such restrictiveness to trip up its big competitors, who have less incentive to offer a service that works well across all devices and formats.

Dropbox is proudly agnostic. This is the gambit that has kept the company from taking the easy path to big returns and selling out to any one of the tech giants. By staying independent, it can market its usefulness to the widest possible swath of users. And the more users who come to depend on Dropbox, the more leverage Dropbox will have to say to Apple, Google, Microsoft, Amazon, and Facebook: Open your gates to us or our millions of users may go elsewhere.

The arc of Dropbox’s success so far gives its founders reason to hope they really can attain that kind of leverage. “If we don’t build a company as influential as Google or Facebook, then we failed,” Ferdowsi says. “I’m, like, perpetually stressed, honestly.” That feeling of pressure can only grow as people tell him his ambitions aren’t crazy.

In the future as imagined by Dropbox, the gadgets are dumb, the features are smart, and data trumps devices. And that data doesn’t just follow us on our laptops, phones, and tablets. It’s in our cars, our fridges, our watches. Dropbox may or may not ultimately build that future. But it’s hard to imagine that someone won’t. Maybe someday a service like Dropbox will be more like a public utility, basic infrastructure for pervasive data that would be invisible, assumed, inevitable.

Until that day, Houston plans to keep holding on to the rocket he launched five years ago. Sitting in a Dropbox conference room as engineers on scooters zip along the long, narrow office’s concrete floors, he remembers the first time he had that feeling, when a beta-launch demo video on Digg sent the waiting list for the service spiking from 5,000 to 75,000 in just one day.

“That was when I was like, oh my God, this thing could be huge. It was sort of like this out-of-body experience,” Houston says. “It was really exciting. You feel the engines rumbling underneath you and it was like, here we go!” Into the clouds.

Correction appended [2:37 P.M. PST/9/17]: A previous version of this story incorrectly quoted Dropbox cofounder Drew Houston saying “anybody with nipples” instead of “anybody with a pulse.”

THE CONTENDERS

If bookies kept odds on Silicon Valley startups, Dropbox would rank as one of the next sure things. But a crowded field of rivals is chasing the same prize: to dominate online storage and sync. Some competitors are taking radically different approaches; others are hoping to crush Dropbox through sheer size. — M.W.

BitTorrent is the most widely used format for sharing pirated content, but this San Francisco company is working to rehab its brand. One way is through BitTorrent Sync, an app that uses the peer-to-peer protocol to sync files across users’ devices while bypassing the cloud altogether.

Both Box and Dropbox started out offering a very similar product before Box shifted to focus on business customers. Now that Dropbox is bulking up its enterprise business as well, it’s on a collision course with the other cloud storage startups in the billion-dollar valuation club.

The world’s biggest tech companies have storage to spare. Google, Microsoft, Apple, and Amazon all offer versions of cloud storage and sync and can afford to undercut smaller competitors. Dropbox will have to keep improving its product to convince users to keep paying.